Wednesday, September 07, 2005

Medical Insurance, Part II

After a long back-and-forth with a friend about health insurance in America, I thought I’d clarify a point I was trying to make in an earlier post.

The issue with being uninsured in the U.S. is that not only do you have to pay for health insurance out of your own pocket, but that the cost of any treatment, in particular any treatment related to hospitalization and procedures such as tests and imaging, is two to five times higher for the uninsured than it is for those that are insured. Literally. That’s because insurance companies have pre-negotiated discounted rates with providers. If you’re an uninsured individual you don’t have that, and after you’ve used the service, you’re not in a great negotiating position…

So what are the conclusions?

1. Buying a very high deductible insurance plan is much preferable to having no insurance. Not because of what the insurance company will pay for you, but because of the lower rates you will pay.2. There should emerge a market for infinite deductible insurance – meaning an insurance wherein the only benefit you get is the benefit of a negotiated rate. The insurance company doesn’t actually pay your bill, it just pre-negotiates the price.

#1 is actionable by people that are uninsured – and is highly recommended by yours truly. #2 depends on the evolution of a market, and on consumers understanding that this type of insurance is a worthwhile investment. That may be a lot to ask. But for reference, such insurance plans do already exist for specific services, such as Orthodontics. I also suspect that the commonly used Vision Services Plan (VSP) is essentially such a plan.